Toyota Prius's Situation and SWOT Analysis - Case Study Example

Contents Contents 1 Executive summary 3 Introduction 3 Situation analysis 4 SWOT analysis 8 Strategic actions 10 Conclusion: 11 References: 12 Running head: The Toyota Prius Student’s name: Instructor’s name: Subject code: Date of submission: Toyota Prius situation and SWOT analysis Executive summary Toyota prius is a leading medium sized hybrid sedan in the global motor market. The car offers a very stylish exterior, an EPA label fuel economy of 52 mpg as well as hybrid synergy drive. Of late the car model has experienced an upward trend in market performance with 550000 units being sold in 2008 in the USA market alone. The Toyota name is one of the most important features for prius owing to the fact that the company is one of the largest global manufacturers of motor vehicles in terms of sales as well as being the front runner for new technology such as fuel-cell cars as well as hybrid cars. Toyota leads the industry with advances in eco friendly design and technology and is only rivaled by Honda. The current market of prius is the well educated, wealthy and medium aged individuals concerned with environmentally friendly features of the car as well as cost saving associated with prius. One of the main challenges facing the marketing of prius is that only few dealers have a prius on their lot for test drivers and hence customers have to wait for a long time before receiving the car (Pickton, 2001). However, there are many opportunities available for the prius to take advantage of such as establishing new plants as well as numerous government incentives offered to hybrid owners. As such, the company ought to come up with strategies aimed at taking full advantage of the opportunities available as well as dealing with the threats facing the marketing of prius. Introduction Since the introduction of the first hybrid car by Honda in 1999, companies have been on the run in trying to come up with technologies aimed at competing in the hybrid car market. Toyota prius is one of the success stories. This report is aimed at conducting a situation analysis on the prius as well as a SWOT analysis and finally come up with strategic actions that should be taken in order to enable prius to remain competitive as well as increase its sales. Situation analysis Industry analysis The first hybrid car to be introduced in the US market was Honda’s two door-insights in 1999 which was closely followed by Toyota’s Prius in 2000 which was the first four door medium sized sedan to be introduced in the market. In 2002, Honda civic which is a gasoline –electric car identical to the original civic model was introduced. Ford entered the hybrid car market in 2004 with the introduction of its escape hybrid. The insurgence of hybrid technology is highly associated with the steady increase in gas prices in the recent past. With the hybrid technology having become the future’s drive, many vehicle manufacturers have come up with their own versions. Such companies include the Daimler Chrysler, general motors, and ford, Honda, Hyundai, Toyota and Volkswagen among others which compete in the dynamic automotive market (Maureen, and Amott, 2000). For instance, it is estimated that over 750000 hybrids will have been sold by 2012. The tight competition has therefore necessitated Toyota to advertise the Prius with the car promotion budget being more than $20 million per year. Technology Toyota uses a very high level technology in producing the Toyota Prius. The car is a gasoline-electric car that has environmental benefits since it reduces environmental pollution that would be caused if it were to use the normal fuel. Toyota Company is widely known for developing fuel-cell vehicles. The technology used in manufacturing prius has been lauded for contributing to environmental benefits in the following ways. -avoidance of the thousands of tons of harmful gases released into the atmosphere, -its use of gasoline and electricity has led to saving of millions of barrels of fuel -there has been avoidance of millions of pounds of smog forming gases. However, it is worth noting that the company had to recall over 75000 prius 2004 as well as 2005 models. The recall was necessitated by a software glitch which causes the car to stall unexpectedly. Sales analysis By the year 2004, the company was forced to boost its production by 50 percent to 36000 units. Despite the increase, demand for prius has been strong and the production has currently doubled. According to the company; the demand for prius is so high such that customers always have to wait for periods of up to four months before taking delivery (Yadin, 2004). The sales are expected to increase globally especially with the realization of the environmental benefits associated with the prius. Competition analysis With the introduction of hybrid technology of automotive production, many companies have also launched their own hybrid models. This has increased the competition that prius has to face in the market. Some of the hybrid models introduced include the Honda insight model, the Honda civic, the Honda accord hybrid which is a larger hybrid car compared to the Toyota prius, the ford escape hybrid and the mercury mariner hybrid. In addition to external competition, the prius also face internal competition from Toyota’s other hybrids which include Toyota highlander hybrid. Other hybrids which compete with the prius include Chevrolet Tahoe; Dodge Durago, GMC Yukon, Porsche Cayenne, Saturn VUE, Toyota Sienna Minivan and Dodge Ram. Other non hybrid cars that compete with the prius include the Honda civic and Toyota corolla. Consumer analysis and target markets The initial buyers of Toyota prius included the early adopters mainly interested in its technical advances as well as the environmental advantage. Some of the environmental friendly adopters included Cameron Diaz and Leonard Dicaprio. The early adopters therefore created the green niche market where buyers were mainly interested in Prius for its being “pollute the air less”, “emit less climate changing gases” and “appropriate technology.” The prius buyers are very diverse with a surfeit of interests. They buy the car so as to show “who they are” since to them, the prius is a fashion statement. The customers tend to have higher levels of education with incomes of $ 100000 a year on average. Most of them are also in their mid ages at around 50 years and are females. Macro environment analysis Driving trends In the modern world, driving a car is quickly becoming a necessity. It is estimated that there are over 1 billion cars globally. For instance in the USA, cars are driven over two trillion miles per year. This implies an expanding market for car manufacturers. Environmental trends Car driving is among the most environmental polluting activities. It disassociated with emission of harmful gases to the atmosphere. The gases include carbon dioxide, carbon monoxide, sulphur oxide and nitrogen oxide in addition to smoke, soot and dust. The harmful gases are associated with depletion of the ozone layer which leads to global warming. On the other hand, this (global warming) is associated with flooding and other environmentally harmful effects. Thus, the production of the environmentally friendly prius was seen as a way of reducing these harmful effects. Political analysis Various governments impose varying rates of taxation and therefore each country should be evaluated independently. However, it is worth noting that various governments are increasingly giving incentives for environmentally friendly production (Rosen, 2004). Production of the Toyota prius is therefore an activity that has received support from various governments. Economic trends The rising cost of living world wide as well as the rising cost of crude oil has in turn helped progressively push up gas prices. The recent global economic crisis also affected the global automotive market negatively. However, with most countries having recovered from the crisis, the market is also gradually recovering. Social trends The media and celebrities have played a very great role in the growing interest in the Toyota prius. Hybrids like prius have been used as alternatives for limousines for Hollywood award ceremonies. Prius has even found its appearance on the boob tube and silver screen. SWOT analysis Strengths Toyota is among the major auto manufacturers globally. The company has production facilities in over 25 countries globally and hence it can achieve the benefits from economies of scale. The company employs the concept of Just in Time production technology which allows reduction of production costs and overheads as well as responds to customers demands quickly. The company also invests a lot on research and design for its various research centers globally (Carmona, 2004). The willingness to invest has brought Toyota an innovative image and led to production of such products as prius which became the world’s first produced hybrid. On the other hand, Toyota Prius is associated with the following qualities which serve as its major strengths - It has better fuel efficiency than other similar sized cars - It is comfortable and offers a quite ride, smooth acceleration and breaking without changing gears - Toyota prius is bristling with all sorts of hi-tech features as well as high scoring in safety tests and gives the customer extremely high consumer satisfaction - The car is environmental friendly as it leads to low environmental pollution - Its performance is good for normal use as there are no problems reaching and exceeding normal cruise speeds and ascending steep hills. Weaknesses Although Toyota realizes varying customer needs from one country to the other, its reputation of reliability has not been enough to convince some buyers who like expressing themselves with their choice cars. For instance, the company faces a lot of competition from BMW, Mercedes, VW, GM and Ford. On the other hand, Toyota prius has been associated with the following weaknesses; -it mainly relies on fossil fuels and is more expensive than other similar sized cars -there is need for specialist attention for servicing and repairs of prius. -many of its components are completely unique for prius and hence long term parts availability is difficult -its peak performance is less than that of other similar priced cars and hence is disapproved by those that expect to drag race their cars. Opportunities Toyota’s new hybrid technology has been very successful in many countries and has already created many brand extensions. The company can obtain the benefit of being the pioneer in the hybrid car market (Graser, 2005). The internet also offers wide variety of opportunities for car marketing and for reducing operating costs. Toyota prius also has opportunities to spread to other markets. The increasing awareness of environmental issues will most likely lead to increased demand likely for prius. In addition governments that seek to meet the targets of the Kyoto protocol are likely to give incentives for hybrid cars like prius with lower emissions. Threats The major threat that prius face include competition from rich motor companies such as ford, Mercedes, BMW among others. Toyota prius also faces threats from various rumors continuously circulated attempting to undermine its features which serve to decrease its consumer confidence. For example, some people say that its batteries need replacement after a certain time. There is the threat of dilution of market shares as competitors introduce more models of green cars especially if prius is overtaken by a greener car. Incase fuel prices fall significantly, then the consumer interest in fuel economy will wane thereby significantly affecting the demand for prius. Strategic actions As discussed above Toyota has a lot of strengths and opportunities that the company can take advantage of. By so doing, the company can greatly improve its market shares and hence the overall sales revenue. The company should continue offering the present and the future prius models competitively compared to other medium sized hybrid sedans. The company should come up with strategies of to market the prius effectively in both urban and metropolitan areas so as to attract the influencers as well as trendsetters target market which will lead to increased sales. Furthermore, the company should come up with ways of producing the prius in the plants in individual countries so as to lower the production costs. This will also enable the company market prius as home made and hence boost customer confidence (Hastings, 2007). For example, the company should produce the car on its Camry assembly line in its Kentucky plant thus reducing production costs and still promote the brand as home made. The company should also develop techniques of reducing the time one has to wait before taking delivery. This will in turn boost sales since at times people may be forced to go for alternatives when the brand is not readily available. Toyota Company ought to also ensure continued quality and prestige of prius. The company should also be proactive with market trends and effectively promote as well as educate the community on what Prius has to offer. Conclusion: Despite the weaknesses and threats identified as facing the trading of Toyota prius, the brand is still a very strong one. The company therefore ought to come up with ways of converting the threats and weaknesses into strengths and opportunities. The company should also take advantage of the strong brand awareness and features of the Toyota prius in order to enlarge its market as well as the sales revenue. References: Pickton, D. (2001). Integrated marketing communications. Harlow: Prentice Hall. Maureen, M & Amott, D. (2000). Marketing communications classics. London: business press, Thomson learning. Yadin, D. (2004). Creative marketing communications, London: Kogan Page limited Rosen, E. (2004). The anatomy of buzz. London: Harper Collins Business. Carmona, J. (2004). Hybrid technology gaining acceptance, Caribbean business. July 15, 2004. Graser, M. (2005). Toyota prius hybrid finds favor in Hollywood. Advertising age. 76(37) Retrieved from academic search premier, November 2005 Hastings, D (2007). The gas miser. Newsweek. 144 (12). Retrieved from academic search premier, November 2005. Read More